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The Citizen
4 days ago
- Business
- The Citizen
How can you save when you use 75% of your income to pay debts?
You would excuse South African consumers for being cynical about saving given that their money runs out before the month does. Most consumers are cynical about National Savings Month in July, asking how they can even begin to think about saving when they spend 75% of their income to repay debts which are usually the result of borrowing just to survive. According to the 2025 1Life Generational Debt Survey, only 41% of employed South Africans manage to save each month and even those who do are often not saving nearly enough to build financial security. A further 36% say they simply do not earn enough to save at all. The situation is just as concerning among middle- to higher-income earners, as DebtBusters reports that individuals earning R5 000 or less are using 75% of their income to service debt. People earning R35 000 or more are not much better off, spending 74% of their income on debt repayments. 'Too many South Africans are overwhelmed by debt and living paycheque to paycheque, but no matter your income level, there are real, practical steps you can take to regain control, build healthier money habits and start working towards long-term financial stability,' Hayley Parry, money coach and facilitator at 1Life's Truth About Money, says. ALSO READ: Savings month: How to save like a millionaire – even if you are not one yet Stop telling consumers they must save and show them how to Tando Ngibe, senior manager at Budget Insurance, says we must move beyond simply telling people to save and start showing them how. 'Budgeting does not have to be complicated. Even small changes can create breathing room and protect you from the financial shocks that so often derail progress. It is about building a new culture of money awareness and resilience.' Insights from the 2025 1Life Generational Debt Survey paint a sobering picture of the nation's financial health: 22% of respondents admit that past financial decisions have left them in debt 34% are carrying inherited debt passed on by previous generations 53% still believe they can build generational wealth, even with a modest income. Separate research from Trading Economics highlights just how strained household budgets are. South Africa's household savings rate dropped to -1.2% in the fourth quarter of 2024 from -1.0% in the third quarter, according to Trading Economics. Parry and Ngibe agree that while the data is sobering, it is not the end of the story. ALSO READ: Savings month: Here's how to build your financial future brick by brick Stop judging consumers for not saving and equip them to Parry says they are not there to judge, but to equip. 'Financial freedom starts with knowledge and consistent action. Even if your starting point is deep in debt, there is always a way forward and platforms like 1Life's Truth About Money, which offers free courses tailored to different life stages, are designed to help South Africans take that first step. 'The choices we make today do not just affect our own futures; they have the power to break cycles of inherited debt and create lasting financial security for the next generation.' Ngibe echoes this sentiment, saying it is time to demystify money. 'Savings Month is not just about setting aside cash but about shifting mindsets, breaking generational cycles and making sure every rand works as hard as you do. With the right tools, support and commitment, financial resilience is possible.' They say this National Savings Month, the message is clear: it is never too early or too late to take back control of your money, and you do not have to do it alone.
IOL News
01-06-2025
- Business
- IOL News
SA Reserve Bank cuts interest rates: What it means for consumers
South African Reserve Bank Governor Lesetja Kganyago. Image: Thobile Mathonsi / Independent media. South African consumers cheered as the South African Reserve Bank (Sarb) cut the interest rate this past week, however, a wider view shows that the relief could be undone by other costs increasing. Sarb Governor Governor Lesetja Kganyago decreased the repurchase rate for the country by 25 basis points (BPS), dropping the repo rate from 7.50% to 7.25%, effectively taking the prime lending rate to the country to 10.75%, from 11%. Hayley Parry, Money Coach and Facilitator at 1Life's Truth About Money told Business Report that the cut could not have come at a better time. Parry said, "What that means is that, for anyone paying back any debt, it means that you are going to be able to save on your debt repayment. For example, for every million Rand you have in a home loan for instance you are now going to be paying R515 less per month at this new interest rate, thanks to the reduction in the interest rate." "It could not come at a better time because there has been a lot of pressure on South African consumers, with increasing electricity prices kicking in. This is great news for anyone who has been feeling the pinch and been struggling to make ends meet. Hopefully, this is going to provide a little bit of breathing room. If you happen to have any money leftover thanks to this reduction in the interest rate, my advice as always is to make sure you put aside extra cash into your emergency fund because you never know when that may come in handy," Parry added. Tando Ngibe, a senior manager at Budget Insurance said, 'This move offers some relief to consumers, particularly those managing debt, as it slightly reduces the cost of borrowing on home loans, personal loans, and credit facilities. This modest cut should be seen as a chance to reinforce, not relax, responsible financial habits. We urge consumers to use any savings from lower repayments to prioritise essential expenses, reduce high-interest debt, and build emergency funds. While the rate cut may support economic activity, it's important to remain cautious. Inflation risks still persist, and returns on savings may decline. Consumers should continue to budget carefully in order to remain financially resilient in these uncertain times.' Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ Consumers still drowning in debt Meanwhile, Neil Roets, CEO of Debt Rescue gave a more scathing view on the Sarb's rate cuts. Roets said that the announcement of the 25BPS cut, may be good news for economists but will not shield South Africans from the burden of the fuel and sin tax levies introduced by Finance Minister Enoch Godongwana within his Budget 3.0 projection. Roets said, "Increased taxing of the workforce is not the answer, the fuel-tax levy and raising sin taxes even higher, will put further financial strain on households, driving them to new depths of despair. This, at a time when they are buckling under the weight of multiple unsustainable inflation-related living costs. The reality is that the Finance minister's decision to impose new tax measures will hurt lower-income families most, as they will bear a proportionally higher burden, thus forcing them to make impossible lifestyle choices with the little disposable income they have left." "The reality is that the slow pace of the country's repo rate reductions is perpetuating the debt trap that millions of ordinary South Africans find themselves in, leaving millions with no option but to survive on credit. This scenario has been escalating since the prolonged tightening cycle began towards the end of 2021, when the Monetary Policy Committee raised the repo rate by a cumulative 4.75% between November 2021 and May 2023, taking it from 3.50% to 8.25%, the highest level since 2014. Sadly, this means more and more South Africans are relying on their credit and store cards to put food on the table and keep the lights on," Roets further said. "The likelihood is that they will default on debt and fall into an even deeper trap, as the cost of credit rises due to existing debt. This is most evident with big purchases like home and car loans. South Africans need real financial relief. This is a glaring red flag that should be at the top of the list of concerns of the authorities," Roets said.
